I.G. Prepares Hitler for War

The onset of the Great Depression and the sharp decline of the price of oil did not shake Bosch’s commitment to his hydrogenation project. There was a strong element in the I.G. managing board, however, who thought differently. In July 1930 Bosch returned from a two-month vacation to find that opposition to the hydrogenation project had reached near-insurrection. He was told that Leuna must be shut down immediately. 1


Its opponents argued that it represented an unbearable burden on I.G.’s finances, which already were strained by the weakened economy. Although 300 million marks had been poured into the project, the process was still not ready for commercial exploitation. 2 The cost of the synthetic gas, they pointed out, was forty to fifty pfennigs a liter, whereas the world price of natural gasoline was only about seven pfennigs. 3 The project was drowning in its own economics.

Although major disputes in the managing board of I.G. were extremely rare, the battle over synthetic oil was a bitter one. The contending parties finally agreed to assign the task of evaluating the project to two committees, one headed by Fritz ter Meer and the other by Friedrich Jaehne, the chief engineer.

Early in 1931 the committees reported to the managing board. The Ter Meer committee recommended continuation of the project, and the Jaehne committee recommended its abandonment. The Jaehne committee reported that synthetic gasoline from coal could not be produced in the foreseeable future at a cost that would insure a profit. The only solution was a government subsidy, which Jaehne, a political conservative, opposed under any circumstances.


He was,

“on principle against any kind of subventions by the State because this leads of necessity to influence by the State. It would be better to close down the plant.” 4

But Bosch was too formidable a figure in the affairs of I.G. In the end, the managing board voted to accept the Ter Meer recommendation. Bosch’s hydrogenation project once again was saved. Not long after this, Bergius and Bosch were awarded the Nobel Prize for chemistry “in recognition of their contributions to the invention and development of chemical high-pressure methods.” 5 Bosch was the first engineer to be so honored.


His image as a national hero grew even brighter.

At this time, an external problem menaced I.G. As Adolf Hitler grew in political strength, his attacks on industrial concerns in which Jewish officers and directors were readily identifiable became more ominous. I.G. Farben was a prime Nazi target as an “instrument of international finance capital” dominated by such well-known Jews as,

  • Max M. Warburg

  • Arthur von Weinberg

  • Alfred Merton

  • Ernst von Simson

  • Otto von Mendelssohn-Bartholdy

  • Kurt Oppenheim

I.G. was cartooned as “Isidore G. Farber,” a grotesque caricature of Shylock, and “I. G. Moloch,” an ugly reference to the Canaanite god to whom children were sacrificed.

I.G. officials were deeply troubled by these attacks and made an effort to stop them through a promising young I.G. employee with good Nazi connections, Heinrich Gattineau, press secretary to Duisberg. Gattineau had been the student of one of Hitler’s favorite intellectuals, Karl Haushofer, the Nazi geopolitician. In fact, Gattineau had written his doctoral dissertation, “The Significance of the Urbanization of Australia in the Future of the White Race,” under Haushofer’s direction. 6


In June 1931, Gattineau wrote his old professor on behalf of I.G.:

“A short while ago you wrote to me that I could come to you with all issues that deal with the N.S.D.A.P. [Nazi party].” 7

He hoped the professor could use his influence with the Nazis to stop the publication of articles characterizing Farben as an instrument of international Jewish finance. I.G., Gattineau pointed out, was already being attacked by the Social Democrats and by the Communists: “Therefore it is really not necessary for the National Socialists to follow the same line.”


The leadership of I.G. was composed of Christian, self-made men who had worked their way up from small-time merchants, engineers, and scientists.

“It would be a good idea if you could talk sometime to Herr H. [probably Hitler] about our situation... I would be most grateful to you, Herr Professor, if you could help me in this instance.”

Gattineau met with some success in mitigating the attack on I.G. in the Nazi press. At the end of 1931 Bosch put him in charge of I.G.’s press center in Berlin, a more strategic place from which to deal with the Nazi hierarchy.

During the following year, Bosch and other I.G. executives took note of the electrifying growth of the Nazi party. In the election at the end of July 1932, the Nazis became Germany’s largest political party, winning 230 of the 608 seats in the Reichstag. In August 1932 Hitler demanded the chancellorship in a coalition government. Hindenburg refused, and the Nazi Reichstag deputies then joined with the Communists to overthrow the Papen government. Hindenburg dissolved the Reichstag, and new elections were scheduled for November 6.

Bosch decided the time had come to establish lines of communication with Hitler and to feel him out about a commitment to I.G.’s synthetic oil project in case he was elected chancellor. However, Bosch was not yet willing for any of I.G.’s top executives to be seen associating with Hitler. He instructed Gattineau to arrange a meeting between Hitler and Heinrich Buetefisch, who although not yet forty was technical director of Leuna and an authority on synthetic oil production.


Gattineau once again called on Haushofer and asked him to arrange such a meeting. Haushofer obliged, and Hitler’s secretary, Rudolf Hess, set it for early November in Munich just before the election. 8 When Hitler arrived for his meeting with Buetefisch and Gattineau, he was obviously very tired—too tired, the I.G. men feared, to understand so complex a matter as the hydrogenation of coal into oil. However, Hitler already knew all about the process and was eager to discuss it.

Before you tell me your view, I would like you to hear my attitude on the whole problem.... Today an economy without oil is inconceivable in a Germany which wishes to remain politically independent. Therefore German motor fuel must become a reality, even if this entails sacrifices.

Therefore it is urgently necessary that the hydrogenation of coal be continued. 9

The meeting had been scheduled for only half an hour, but it went on for two and a half hours, with Hitler pressing for detailed information on the conversion of coal into oil. As Gattineau later recalled,

“[He] surprised me again and again by his amazing understanding for technical matters.” 10

Before the meeting ended, Hitler had outlined a program under which he planned to make Germany self-sufficient in oil with the help of I.G. Farbenindustrie. World War I had taught him that Germany’s dearth of raw materials had rendered the British blockade a decisive weapon leading to Germany’s defeat.


By a program of self-sufficiency he was determined to change Germany from a country deficient in natural raw materials into a self-sufficient military power. Hitler assured the I.G. visitors that their company could depend on his support, both financial and political. Gattineau and Buetefisch, elated by Hitler’s response, reported back to Bosch. After hearing the entire story of the extraordinary meeting, Bosch remarked, “The man is more sensible than I thought.” 11


In the November 6 election a few days later, the Nazis suffered a decisive setback. They lost 34 seats in the Reichstag, slipping to 196; the Communists, on the other hand, gained 11 seats and now had a total of 100. German industrialists and financiers, more terrified by the Communist advance than by the Nazi setback, came to Hitler’s support at this critical moment. In fact, thirty-eight of them did so publicly 12--including such powerful figures as Schacht and Baron von Schroeder from banking; Cuno from the North German Lloyd Lines; Krupp, Voegler, and Thyssen from steel; and Siemens and Robert Bosch (Carl Bosch’s uncle) from electrical engineering and manufacturing; but no I.G. personnel.


Carl Bosch was not yet ready to make a public commitment. Hindenburg was unmoved by this coalition of financial and industrial strength. He chose General Kurt von Schleicher instead. But Schleicher was unable to establish a stable government. Finally, on January 30, Hindenburg capitulated and appointed Hitler chancellor. However, Hitler’s hold on the office was tenuous. Another Reichstag election was scheduled for March 5.

On February 20, Hjalmar Schacht, now among the most active members of the financial community supporting Hitler, called Germany’s leading industrialists and financiers to a secret meeting at the home of Hermann Goering. This time I.G. stood up to be counted. Among those present was Baron Georg von Schnitzler, one of the most important nontechnical members of the I.G. managing board and generally known as “I.G.’s salesman.”


His presence had a powerful effect on the business community of Germany. I.G., after all, was the country’s largest corporation. Schacht announced that he expected to raise three million marks from the assembled businessmen for Hitler’s election campaign. 13


At the direction of Bosch, Schnitzler pledged 400,000 marks, by far the largest single donation. 14 I.G.’s support of Hitler was now official. In the March 5 election, the Nazis fared better than they had in the previous election. They gained 5.5 million votes—not enough to give them a majority of the seats in the Reichstag but enough to maintain Hitler as chancellor of a coalition government.

Shortly after the election, Hitler and Bosch met for the first time. The meeting seemed to go well at first. Hitler gave Bosch absolute assurance that his government would fully back the synthetic oil project, and Bosch agreed to expand the Leuna plant. Gasoline self-sufficiency for Germany was the common goal for both men. Bosch then moved to a subject that his associates at I.G. had urged him to avoid. He warned Hitler that if Jewish scientists were forced to leave the country both physics and chemistry would be set back 100 years in Germany.


Before Bosch could proceed further Hitler roared, “Then we’ll work a hundred years without physics and chemistry!” When Bosch tried to pursue the subject, Hitler rang for his adjutant and announced, with calculated insult, “The Geheimrat wishes to leave.” 15


Although Hitler did not let the episode interfere with his support of I.G.’s synthetic oil project, he never again would appear in the same room with Bosch. On one occasion, Hitler arrived at a meeting, saw Bosch sitting on the platform, and abruptly left.


Thereafter Bosch’s associates were careful to keep the two men apart. Bosch was undeterred by Hitler’s hostility. He continued his campaign in defense of Jewish scientists in Germany. In April he learned that Fritz Haber had been forced to resign his position as a professor at Berlin University despite the fact that Haber was a convert to Christianity and one of Germany’s most revered scientists. Bosch tried to organize a movement among non-Jewish Nobel Prize winners to resist the Nazi persecution but with very little success.


The great physicist Max Planck, who was no anti-Nazi and whose eminence was sufficient to gain him an audience with Hitler, pleaded in vain with the Fuehrer to reverse the expulsion of Haber. Hitler’s response was so violent that it was some time before Planck recovered emotionally. Another of the Nobel laureates exclaimed in fear and despair, “We cannot draw our swords for the Jews!” 16


Haber left Germany, but a few months later he decided to return. On his way back, he met Hermann Schmitz in Switzerland; Schmitz urged him to stay out of Germany, pointing out that the Nazi terror should not be underestimated. A miserable Haber never set foot in Germany again. A broken man, he died in Basel in January 1934. Germans were not permitted to mourn his passing.

On the first anniversary of Fritz Haber’s death, however, Bosch organized a memorial ceremony under the auspices of the Kaiser Wilhelm Institute, in defiance of the Nazis. 17


He sent a personal invitation to leading scientists and educators, I.G. executives, and government officials who had had some relationship with Haber. When the Nazi minister of education learned that some of his subordinates had been invited, he forbade their participation:

“The intention... to sponsor a memorial service on the occasion of the first anniversary of Haber’s death must... be interpreted as a challenge to the National Socialist State.... This interpretation is confirmed by the fact that the sponsors have not shrunk from urging those invited to the ceremony to appear in uniform.”

Over 500 people packed the hall, many from I.G., as well as Haber’s military friends. His professional colleagues, however, were more cautious and a number did not come. Max Planck, despite his experience with Hitler, did attend and although he opened the meeting with a Nazi salute he paid tribute to the “German scholar and German soldier, Fritz Haber.” 18 I.G. itself continued to be harassed by some of the lesser figures in the Nazi hierarchy.

For example, the pharmaceutical branches at Hoechst and Leverkusen were attacked because of their use of animals for testing drugs. Under the Nazis, vivisection had been declared a capital offense. Heinrich Hoerlein, I.G.’s most prominent medical scientist, tried to explain to a high ranking Storm Trooper the folly of such an edict. The reply was that the Nazis wanted nothing to do with I.G. since it was an “international Jewish organization.” 19

In the total picture, these problems were relatively minor irritations. I.G., in fact, was making great strides in cementing its position with the new regime. Hermann Schmitz was appointed an honorary Nazi deputy in the Reichstag, a position attesting to the firmness of his commitment to Hitler’s goals. Schnitzler opened up a salon in Berlin where foreign industrial and political dignitaries were invited to mingle with high Nazi figures. Bosch’s young favorite, Heinrich Buetefisch, became a colonel in Himmler’s S.S. as did Christian Schneider, who was among the most eminent of the older “high pressure” scientists in I.G.

Relations with the military establishment were carefully nurtured. Max Ilgner, the nephew of Hermann Schmitz, had for some time acted as I.G. liaison to Army Ordnance. Over the years he had developed a good relationship with a young officer on the economic staff, Georg Thomas, keeping him informed of developments in the manufacture of synthetic oil at Leuna. By no means incidental to the friendship was Thomas’s active role as an army officer pushing raw material self-sufficiency, especially in oil and rubber. In fact, back in 1928, he had written a secret memorandum on behalf of the Army Ordnance economic staff recommending the development of synthetics “through new discoveries and inventions” to replace the strategic raw materials that Germany had to import from abroad. 20


He specifically referred to I.G.’s synthetic oil development at Leuna, noting that when “substitutes for foreign raw materials can be developed only through very expensive processes, these must be supported by Army Ordnance.” Technologically and financially, Thomas’s thinking was the unconventional kind that I.G. appreciated. Thomas was still on the economic staff of Army Ordnance with the rank of lieutenant colonel when the Nazis came to power. There could be little doubt that Ilgner was an effective emissary for I.G.


For example, by June 1933 I.G. had become involved with the Third Reich in one of the most secret enterprises in Germany—the building up of an illegal military air force, a direct violation of the Versailles treaty. A special independent finance office was created by an extraordinary joint decree of the Finance, War, and Aviation ministries for the “secret purposes of military aviation [emphasis in original].” This finance office was placed under the sole control of Hermann Goering, minister of aviation, “who alone will authorize acceptance of deposits and payments.”


So secret was this decree that knowledge of its existence was limited to a small circle of the highest military and Nazi officials. Included in this select group was Max Ilgner, who was among the very few to receive an official copy of this highly classified document. 21


It was not long after the secret decree to finance the Black Luftwaffe was promulgated that Carl Krauch received a visit from General Erhard Milch, state secretary of the Aviation Ministry and Goering’s right-hand man. (Although Milch’s father was Jewish, his mother, an Aryan, had signed an affidavit that she had borne her son out of wedlock to an Aryan. And Goering, who did not take anti-Semitism seriously when his own interests were concerned, had given Milch his protection, declaring, “I myself decide who is a Jew and who is not, and that’s all there is to it.”)


Milch had been referred to Krauch as the expert in I.G. who could be relied on to give the most accurate report on Germany’s liquid fuel capability. Primarily, Milch was interested in learning whether I.G.’s synthetic oil was suitable for aviation gasoline. Krauch assured him that it was.

Milch then asked what level of production could be attained in the next few years.

Krauch promised to investigate and send Milch a report.

On September 15, 1933, Krauch submitted his findings in the form of a treatise on the German motor fuel economy. 22 He proposed a four-year plan for the expansion of Germany’s production of “domestic” motor fuel in which he recommended that the production of fuel from domestic raw materials such as coal be increased more than three and a half times in the next four years. I.G.’s hydrogenation process was central to Krauch’s plan. He emphasized that “it would easily be possible to produce aviation gasoline as well as lubricants suitable for airplanes through domestic production.” As a matter of fact, he said the Lufthansa was already engaged in exhaustive tests.


The next day Milch showed Krauch’s memorandum to the Army Ordnance Chief, Major General von Bockelberg, and his aide, Lieutenant Colonel Georg Thomas. 23 He told them that the Air Ministry backed Krauch’s four-year plan and suggested “a joint energetic approach.” The army officers concurred.

During this same period Carl Bosch was spending most of his time conferring with government officials in Berlin about the expansion of I.G.’s production of synthetic oil as contemplated in the understanding with Hitler. In July Bosch felt so confident about the progress of these negotiations that he told two visiting executives from Du Pont that plans were under way to increase production fourfold, from 100,000 to 400,000 tons a year. 24


He may have hated what Hitler stood for but he had little doubt that the commitment of the Fuehrer to I.G.’s synthetic oil project was genuine. Only I.G. could provide Hitler with oil self-sufficiency.

There were some officials in I.G. at that time who were expressing unequivocal support of the Nazi government. One was Carl von Weinberg, who had just become Deputy Chairman of I.G.’s Supervisory Board, a position on the board second only to Duisberg. Although Weinberg was a Jew, he told the Du Pont visitors that he gave the Nazi movement his full stamp of approval, adding that all of his money was invested in Germany, that he did not have one pfennig outside the country. 25


On December 14, 1933, Bosch and Schmitz on behalf of I.G., as well as representatives of the Third Reich, with the personal approval of Hitler signed the formal agreement. By the terms of the contract I.G. was to expand the synthetic oil installation at Leuna so that in four years, by the end of 1937, it could produce 300,000 to 350,000 tons annually. The Reich, in return, pledged to guarantee a price corresponding to the cost of production, including a five percent interest on invested capital and generous depreciation, and to take measures to assure the sale of all synthetic oil not sold by I.G. through its own outlets. 26


The agreement was a monumental technological achievement in modern power politics. It was now only a matter of time before I.G. would provide Hitler’s Germany with total independence from foreign oil, a matter of profound diplomatic and military significance. Never again would Bosch have to worry about funds for his beloved project. And only after the U.S. Eighth Air Force bombed I.G.’s synthetic oil plants into rubble in April and May 1944 did Hitler have to worry about oil.

With Germany’s plan for oil self-sufficiency set, Hitler turned his attention to the next most important strategic raw material import, rubber. Since the source of natural rubber was literally on the other side of the world, Germany needed to develop a synthetic substitute for this substance to protect itself against an embargo or naval blockade. Unfortunately, Hitler’s concern with rubber autarky was not shared by some key members of the civilian and military bureaucracies. A number of civilian economists regarded it as sinful to allocate vast resources and funds to such a project when natural rubber for stockpiling was available at depressed prices on the world market.


The military added another objection; none of the available synthetic rubbers appeared satisfactory for military use, and depending on future breakthroughs was too risky. In fact, between 1931 and 1932 I.G. had virtually suspended its Buna program as the bottom dropped out of the natural rubber market. With it disappeared any prospect for making Buna competitive. When Hitler came to power I.G.’s Buna operation was minimal. But shortly Hitler’s plans for the future of Germany began to breathe new life into the project. In late 1933, at about the time that the synthetic oil pact was concluded, representatives of Army Ordnance and the Ministry of Economics approached I.G. to resume its work on Buna.


However, mere encouragement was not enough for Bosch. Without the guarantee of a sufficient subsidy he feared a repeat of the financial difficulties that had beset the synthetic oil project. To move forward, solid government support was essential. Specifically, Bosch wanted the government to insure that commercial tire companies would provide “effective cooperation” in manufacturing test tires out of Buna. In addition, he demanded that at least 1000 to 2000 Buna tires be tested on military and other government owned vehicles. In a memorandum to the interested government agencies I.G. stated its attitude quite bluntly: “Before we resume our efforts on a large scale, it is necessary that the government decide whether it is sufficiently interested in the manufacture of synthetic rubber in Germany to be prepared to support the project in [this] manner.” 27


It was still early in the Third Reich and neither Army Ordnance nor the Ministry of Economics understood the depth of Hitler’s devotion to military self-sufficiency. When they refused to accede to Bosch’s demands, the Buna project continued in relative limbo. In the fall of 1934, troubled by the lagging synthetic rubber production, Hitler personally took an interest in the matter. He appointed his own economic adviser, Wilhelm Keppler, as the plenipotentiary for raw materials and synthetics with the specific responsibility for synthetics. This placed Keppler in conflict with Hjalmar Schacht, who as acting head of the Ministry of Economics had official responsibility for “mobilization for economic warfare.”

Schacht viewed economic self-sufficiency in terms of conserving foreign exchange; hence, cost was a decisive factor in determining the choice of synthetics to finance and develop. Keppler, who more accurately reflected Hitler’s own views, favored raw material self-sufficiency, governed primarily by military need. Cost and conserving foreign exchange were secondary considerations. The plenipotentiary and the minister were thus on a collision course. Under normal circumstances, Keppler, who in private life was a mechanical engineer and the owner of a small glue factory, would have been no match for the overbearing and powerful Schacht. But Keppler was a dedicated Nazi, who enjoyed Hitler’s confidence. That fact more than equalized matters.

Keppler called a meeting of the representatives of I.G., the Ministry of Economics, Army Ordnance, and the tire industry. He pointed out to the group Hitler’s dissatisfaction with the progress of the synthetic rubber program. The Fuehrer wanted the project pushed ahead “with elemental force.” 28


Ter Meer spoke up in behalf of I.G. Although delighted with Hitler’s directive, he thought it necessary to point out a number of factors impeding the program. The commercial tire manufacturers were not enthusiastic about synthetic rubber, especially Buna, as a tire material. He also mentioned the doubts expressed by Army Ordnance. Confronted with such negative attitudes, I.G., Ter Meer said, was reluctant to invest considerable funds and effort in the mass production of Buna. Before making such a commitment, Ter Meer needed assurances that the tire manufacturers would produce Buna tires on a large enough scale. 29


The tire manufacturers declared that it was imprudent to mass-produce Buna tires because of the staggering cost; a Buna tire cost ninety-two marks to manufacture as compared with eighteen marks for a natural rubber tire. The Army Ordnance officials were no more willing to go ahead with Buna than the tire people. Buna, they maintained, was not up to the standards required by military use. Keppler brushed aside all these objections. He reminded those in opposition that the promotion of synthetic rubber production was a pet idea of the Fuehrer and must not be delayed. 30


Army Ordnance had no choice but to engage in a series of extensive tests over the next six months. Hitler, who had a propagandistic as well as a military need for Buna, had no intention of waiting for the technical results. On September 11, 1935, at the seventh Nazi party congress at Nuremberg, he announced to the world that “the problem of producing synthetic rubber can now be regarded as definitely solved. The erection of the first factory in Germany for this purpose will be started at once.” 31


A few days later Keppler met with Ter Meer and was adamant that Hitler’s announcement meant that a Buna factory be built as quickly as possible. Ter Meer, still cautious, agreed to commit I.G. to such a project provided the financial risk was minimized. For this reason he wanted a purchase guarantee for the plant’s output from Army Ordnance. Keppler, under the pressure of Hitler’s public statement, assured Ter Meer that this posed no problem. In fact, he promised to negotiate the purchase contract with the military authorities himself.

But Keppler had not accurately assessed either the situation or his own influence with the army at that moment. Army Ordnance, after its six-month test of the Buna tires, concluded that they were not satisfactory for military use. It refused Keppler’s demand to enter into a purchase agreement with I.G. or to support the building of a Buna plant. Instead, the army decided to meet military requirements by stockpiling natural rubber. 32


Army Ordnance’s decision not to go ahead with a Buna tire for military use was a serious blow to I.G. hopes. At the same time, Schacht had no intention of helping either I.G. or Keppler by supporting a program of civilian use for Buna. Buna tires would be far too expensive, he argued, to produce foreign exchange for Germany in the export market. The army’s evaluation of its inferior quality only buttressed Schacht’s opposition. Buna appeared to be in serious trouble.

Keppler did not intend to let Schacht block Buna development. He took the problem up with Hitler himself. After receiving the Fuehrer’s unqualified support, he wrote to I.G.:

“As you know, the Fuehrer is greatly interested in speeding up the construction of the installation as much as possible. I therefore ask you to carry on with your planning work as before and to start building as soon as an agreement between us has been reached [emphasis in original].” 33

That was all the encouragement I.G. needed. As a result of Keppler’s assurance of Hitler’s support, Bosch made the decision to build a large-scale Buna plant without waiting for a formal agreement with the government. He selected a large site in Schkopau near the high pressure equipment of Leuna and before long construction got under way. It was a bold move in the Bosch tradition.

In early 1936, oil was pushed to the forefront of international diplomacy. The Italo-Ethiopian war had been going on since October 1935 and all attempts by the League of Nations to stop Mussolini’s aggression proved ineffective. Finally, the League decided on a drastic step. It set up a committee to consider the imposition of an oil embargo on Italy. The rationale was simple. Italy, without a domestic source of oil, was totally dependent on imports. An effective embargo by League members could bring its military adventures to a complete halt.

While Mussolini and the League of Nations were sparring, Hitler was planning aggressive military moves of his own. In mid-February, he issued a statement designed to catch the attention of his potential enemies and the League. At the opening of the annual German automobile show, he spoke of the fact that Germany had mastered the problem of making synthetic oil and synthetic rubber from coal: “You may rest assured that we are determined to exploit both of these discoveries to their utmost practical limit,” Hitler told the large, enthusiastic audience. With an obvious reference to contemplated League action against Italy, he added that the “miracle of synthetic fuel” possessed “political significance” for Germany.


An oil embargo, Hitler implied, held no terror for Germany 34—I.G. was performing its miracles on schedule. In the meantime, the League continued to press for an embargo. On February 22 the League’s sanction committee was convened to prepare for such an action. Mussolini declared in response that if oil sanctions were imposed Italy would leave the League of Nations and no longer consider itself bound to support Germany’s observance of the Locarno treaty. This announcement was calculated to put pressure on France, whose borders Italy was pledged to protect as a treaty signatory.

Mussolini’s threat worked. On March 2 the British foreign minister, Anthony Eden, under pressure from France, agreed to delay the decision on the oil embargo until a fresh appeal had been made to Italy to end the Ethiopian war. Mussolini was given until March 10 to respond. Mussolini sent word to the League within days that he would accept “in principle” the League’s appeal to negotiate a peace in Ethiopia.

However, on Saturday, March 7, Italy’s aggression in Ethiopia was completely overshadowed by a far greater menace to world peace. Hitler marched his troops into the Rhineland, in violation of the Versailles and Locarno treaties. The world stood on the brink of war, waiting for England and France to respond in support of their treaty obligations. However, England and France were unwilling to accept Hitler’s challenge, and Hitler’s occupation of the Rhineland proceeded without interference.


Although the League of Nations found that the Germans had committed a breach of peace, it shrank from imposing the kind of sanctions with which it was threatening Italy.


Two countries that provided much of Germany’s oil, the Soviet Union and Rumania, nevertheless did pursue sanctions of their own for a time; the U.S.S.R. stopped all oil exports and Rumania raised the price of oil sold to Germany. 35 The Soviet and Rumanian actions created a serious fuel shortage in Germany. To cope with the problem, Hitler appointed Hermann Goering fuel czar. However, before Goering had time to do much in this position, a greater opportunity presented itself to him—to become czar of the entire German economy.


This enormous delegation of power came about as the result of the strained relations between Schacht and Keppler. To end the dispute, Hitler assigned Goering the task of mediating between the two men. But by mid-March, conditions had so deteriorated that Schacht sent out a circular order to all his staff forbidding any official dealing with Keppler. Schacht took these extreme measures not simply because of his personal distaste for Keppler but principally because the outcome of the conflict would decide who was to dictate the financial and economic policies of the Third Reich and whether sound economics was to dominate Nazi policy or vice versa.


Nazi radicals like Keppler and Goebbels favored expansion of government expenditures to maintain employment and to prepare for war. Schacht, on the other hand, had become increasingly disturbed by the drain on foreign exchange caused by the rapidly accelerating military rearmament program and by his inability to control government expenditures and restrain the extravagances of the Nazi bureaucracy. He concluded that authority over foreign exchange and raw materials must be centralized in one organization headed by a leading Nazi, whose policies he could dominate.


In Schacht’s calculations, the nominal head would be a figure with enough authority in the Nazi hierarchy to be able to impose the unpopular measures he had in mind. Goering seemed to him the perfect choice for such a front. Since Goering knew nothing about economics, Schacht would be able to formulate policy. Through Goering, Schacht planned to get rid of opponents like Keppler and to assume tight control over all government expenditures.

As Goering recalled it, Schacht called on him and suggested that he should head up a commission for raw materials and foreign exchange:

“It was agreed that I should not function as an economic expert, which I was not; but... I should be the driving power and use my energy.”

Goering, however, was wise to what Schacht intended:

“His idea was that I did not know very much about economics and he could easily hide behind my back.” 36

Schacht had made a major miscalculation. When Hitler, on April 27, appointed Goering economic czar with the title of commissar of raw materials and foreign exchange, the official government release made it bluntly clear that Schacht had in effect become Goering’s subordinate. By the terms of the appointment, Goering assumed authority over all the ministries on economic matters. The New York Times reported that “Colonel-General Hermann Goering in effect superseded Dr. Hjalmar Schacht today as dictator of the economic and financial policies of the Third Reich.” 37


The Times correctly divined the true meaning of the event. When Schacht learned the specific details of Goering’s appointment, he was irate. On April 29 he met with Hitler and Goering and tried to get Hitler to issue a follow-up, “explanatory” announcement that would make it clear that Schacht was not subordinate to Goering in any way. But no “clarifying” communique was issued; the original announcement was permitted to stand. 38


Goering did make one concession to Schacht. He agreed to use only a small corps of experts on his new raw materials and foreign exchange staff. He put Lieutenant Colonel Fritz Loeb, of the Air Ministry, in charge of the organization. And he asked Bosch to recommend a man from I.G. to head up research and development. Bosch chose his closest friend and confidant, Carl Krauch. 39


Krauch was the logical choice. Since the preceding September, Krauch had been chief of a new military liaison office in Berlin “to provide for systematic cooperation within the I.G. in view of the current development of military economy”—particularly in connection with such strategic raw materials in the high pressure chemical field as synthetic oil, synthetic rubber, and nitrates. 40


Second to Bosch, Krauch was Germany’s leading expert on high pressure chemistry. In fact, in some ways, he had become Bosch’s alter ego.

When Krauch joined Goering’s raw materials and foreign exchange staff, he did not give up his key positions at I.G. He retained his membership on the I.G. managing board and his powerful role as head of the I.G. division covering the high pressure chemistry field. He also continued to act as head of I.G.’s military liaison office in Berlin. Two of the top men from this office—Gerhard Ritter and Johannes Eckell—were transferred to Krauch’s research and development office.

During the summer of 1936, Goering’s new organization worked on a plan to ease the demand for foreign exchange and to assure an indigenous raw materials basis. Goering and Schacht were soon at odds. The Schacht-Keppler conflict was now drowned out by a battle for power between Schacht and Goering. Schacht continued to insist on adherence to traditional economic principles. Goering, like Keppler and other Nazi radicals, insisted that Germany must greatly increase expenditures in preparation for war—and this included a vastly expanded synthetic raw materials program.

“If war comes tomorrow,” said Goering, “we will have to rely on substitutes. Then money won’t play any role at all. If that is the case, then we must prepare in peacetime....” 41

Soon synthetic rubber became the subject of a bitter disagreement between Schacht and Goering. Goering declared that “rubber is our weakest point,” 42 and accused Schacht of being the principal reason for this vulnerability. On May 27, at one of the first meetings of the council of ministers to discuss substitute materials, Goering, looking squarely at Schacht, asked if anyone had any objections to the production of synthetic “war raw materials.”


Schacht immediately spoke up to say that he had no objections in principle except “in cases where prices for synthetics are far beyond world-market prices so that the products cannot compete.” He then cited Buna as an example; it was so much more expensive than natural rubber that its production was thoroughly uneconomical and unwarranted. Goering interrupted to explain that it was necessary to consider the issue only “from the standpoint of waging war.” 43


Economic principles in that case had no validity. Schacht, who had become increasingly disturbed about the inflationary effects of rearmament, was unmoved and persisted in his strong opposition to Buna.

Despite Schacht’s inflexible stance Goering ignored him. His raw materials and foreign exchange staff began to plan for a vast expansion of the Buna program. On June 15, Krauch, in his government capacity, invited representatives of Army Ordnance, the War Ministry, and the Keppler office to consider a dramatic enlargement of the productive capacity of the Schkopau plant, from 200 to 1000 tons a month. A few weeks later, plans were being drawn up for a second I.G. Buna plant, also with a production capacity of 1000 tons a month. 44


Schacht was also strongly opposed to another self-sufficiency program that Goering and his raw materials and foreign exchange staff were planning to institute—a proposal to switch from the rich Swedish iron ore to Germany’s own low-grade iron ore in the production of steel. Schacht argued that such a changeover would necessitate an extremely expensive transformation of the German steel industry’s blast furnaces. The consequent increase in the cost of German steel, he argued, would make it impossible to export. 45 According to Schacht, Germany could not afford such a loss in foreign exchange.

Schacht continued to press for a reduction of military expenditures and insisted on the right to decide how the military budget should be allocated among the various ministries. He called on Goering to take immediate steps to solve the deepening foreign exchange crisis. Goering replied that nothing would be done until at least the end of September. The clash between these two powerful personalities was rushing toward a climax.

The conflict came to a head in late August. By then it had become obvious that only Hitler had sufficient strength to resolve the dispute. On August 26 he took the unusual step of preparing a memorandum—one of the few times that he ever gave a written order—setting forth his decision to institute a four-year plan to prepare Germany for war. 46


The plan concerned itself primarily with what Hitler regarded as Germany’s principal economic problem, the pressing need for raw materials. The definitive solution, Hitler wrote, lay in the extension of Germany’s living space in order to expand its raw material base. This would be accomplished by conquest. In the meantime, however, Germany would have to find a temporary solution within its own borders. Since Germany could not reduce its imports of food, a balance would have to be found by other means.


And those other means must not be at the expense of rearmament:

I must reject here with the utmost vehemence the conception according to which a limitation of natural armaments, that is, a limitation of the production of weapons and ammunition, can bring an “enrichment” in raw materials which eventually could be profitable to Germany in case of war. Such a conception is based upon a complete misunderstanding—to put it mildly—of the task and military requirements lying before us.

Neither was the stockpiling of raw materials the answer. No country could stockpile for more than a year of war. And the accumulation of foreign currencies did not necessarily insure the acquisition of supplies during war. Hitler pointed to the experience in World War I when Germany had large currency assets but was unable to purchase sufficient fuel, rubber, copper, and tin.

Hitler next drew up a program for “a final solution of our vital necessities” during war. German fuel production must be developed with the utmost speed and brought to a definitive completion within eighteen months, a task that had to be handled with the same determination as the waging of war. The mass production of synthetic rubber must be organized and achieved with the same speed.

At this point Hitler became unmistakably clear as to which side he was taking in the quarrel between Schacht and Goering.


(Schacht later suggested why Hitler sided with Goering:

“My incessant struggle to ensure saving and careful use of raw materials and foreign exchange and my steady insistence on a slowing down of armaments must have gradually got on Hitler’s nerves.” 47

There was, however, more to it than that.)


Hitler’s attack on Schacht was specific. There was to be no more argument that the synthetic rubber project was premature:

“This matter does not concern the Ministry of Economics at all. Either we have a private economy today, in which case it is its task to rack its brains about production methods, or we believe that the determination of the production methods is the task of government, in which case we do not need the private economy any longer.”

Hitler pursued the attack on Schacht by ridiculing the argument of cost:

“The question of production costs of these raw materials is also of no importance, since it is still more profitable for us to produce expensive tires in Germany and utilize them, than to sell theoretically cheap tires but for which the Minister of Economics cannot grant any foreign currency.”

As far as Hitler was concerned, the cost of synthetic raw materials had ceased to be a decisive consideration.
Using the same logic, Hitler also ruled that German iron production had to be increased despite the fact that German ore contained twenty-six percent iron whereas Swedish ores contained forty-five percent.

The objection that in this case all German blast-furnaces will have to be transformed is also unimportant—and, above all, it does not concern the Ministry of Economics. The Ministry of Economics has only to set the tasks of the national economy; the private industry has to fulfill them. But if the private industry considers itself unable to do this, then the National Socialist State will know by itself how to resolve the problem.

Hitler was warning the recalcitrant steel producers that if they did not fall into line and begin using German iron ore the Nazi government would construct state owned steelworks that would do so. In fact, that was later done.

Hitler concluded his memorandum by pointing out that almost four precious years had been wasted during which Germany could have become completely independent of foreign countries in fuel and rubber and partly independent in iron ore supplies.

Just as we produce 700,000 to 800,000 tons of gasoline at the present time, we could be producing 3 million tons. Just as we produce several thousand tons of rubber, we could already be producing 70,000 to 80,000 tons per year. Just as we increased our iron ore production from 2½ million tons to 7 million tons, we could process 20 to 25 million tons of German iron ore and if necessary 30 million.

These deficiencies had to be overcome. During the next four years, Hitler demanded that the German armed forces be made ready for combat and the German economy fully mobilized for the war that Hitler left no doubt was inevitable. A few days after writing this memorandum, Hitler informed Schacht, who deliberately had not been given a copy, that he planned to announce his new economic program of German self-sufficiency at the Nazi party congress in Nuremberg the following week. Schacht, appalled by the potential consequences of such a program for the economy, appealed to Minister of War Werner von Blomberg to talk Hitler out of making the statement. 48


But Blomberg refused—for good reason. He had been one of the small select group to whom Hitler had given his memorandum and he had decided to throw his lot in with Goering. In fact, Blomberg had already written to Goering, who would be the determining factor in the allocation of funds for the armed forces, requesting a forty-two percent increase in military funds for 1937. 49 Schacht pressed his opposition but it was a futile exercise.

True to his warning to Schacht, Hitler announced the four-year plan at the Nazi party congress:

“In four years Germany must be wholly independent of foreign countries in respect to all those materials which can in any way be produced through German capability through our chemistry, engineering, and mining industries.” 50

Six weeks later, on October 18, Hitler designated Goering plenipotentiary for the four-year plan to “put the entire economy on a slate of readiness for war.” 51


In the words of the leading Nazi newspaper, the Voelkischer Beobachter,

“There will be only one ultimate authority in all economic questions—Party Comrade Goering.” 52

One of Goering’s first decrees in his new position was to announce the organization for the execution of the four-year plan. Although provision was made for the participation of both Schacht and Keppler, Goering made it clear in this decree that “all persons and organizations of the Party and of the State participating in the Four-Year Plan have to obey my instructions [emphasis in original].” 53


Goering’s raw materials and foreign exchange staff was transferred to the office of the four-year plan and was given responsibility for developing a specific program of investments for the four-year plan, a matter of considerable interest to I.G. Carl Krauch continued as head of research and development with a staff made up almost entirely of I.G. men. One of these, Johannes Eckell, was put in charge of the rubber sector. 54


From now on I.G. would deal almost exclusively with Eckell in its synthetic rubber negotiations, 55 a not unpleasant prospect.

The preliminary four-year plan for German self-sufficiency, drafted by Loeb’s staff in the summer of 1936, had been based mainly on coal, iron, and chemicals. Coal production, it was decided, was sufficient, requiring no expansion. In the case of iron, it had become evident by the fall of 1936 that the German steel industry was not willing to open up the low-grade iron ore fields in the cause of German self-sufficiency, and Goering had begun to consider building a state owned plant. That left the chemical industry, which in the next few months was to be allocated ninety percent of four-year plan investments.


And of that share, I.G. was to receive 72.7 percent. 56 So large was I.G.’s share that the chief of the chemistry department of the Ministry of Economics remarked later, “The Four Year Plan was, in fact, an I.G. plan.”


Some companies objected to such dominance, and Schering and Merck, two pharmaceutical firms, refused to participate, fearing their operational secrets would become available to I.G. with no consequent benefit to themselves. 57 Schacht joined the opposition to I.G. If there had to be a four-year plan, it should not be an I.G. plan. He made this point as strongly as he could with Goering. Goering was still willing to try to placate Schacht since Hitler wanted to keep him on the cabinet as a symbol of “conservatism.” However, an official of the Ministry of Economics observed.


Goering was unwilling to go so far as “to make any concessions which would be to I.G.’s disadvantage.” 58


Schacht’s antagonism toward I.G. was nothing new. As early as 1933, he had tried to create a union of independent chemical companies in order to offset I.G.’s power. However, the independent companies had been afraid to challenge I.G., even with Schacht’s support. 59 Finally, Schacht took his objections to I.G.’s domination of the four-year plan directly to Hitler. 60


But Hitler had settled on his course of action; Germany must become self-sufficient in oil and rubber in eighteen months and that required the genius and facilities of I.G. Preparation for war was Hitler’s guiding light in shaping the economic policies of the Reich. To Hitler. Schacht’s demand that sound and conventional economic policies be followed was irrelevant. This became more obvious as the plans for synthetic rubber production moved ahead.


The office of raw materials and synthetics was negotiating with I.G. for a second Buna plant while Schacht and Army Ordnance were strongly opposing even the first plant. Despite such formidable opposition, Eckell advised I.G. that the “supreme authority” wanted the second plant. 61


He added that the problem of financing would be solved “over the heads” of the army and the Ministry of Economics. Schacht’s days as an influence in Nazi Germany were numbered. By the end of 1937, he had lost all his official positions, and by 1944 he was interned in a concentration camp.

The year 1937 marked a drastic change in the character of I.G. That year it became completely Nazified. Membership in the Nazi party was opened up, and almost all of the members of the I.G. managing board who did not already belong now joined up, including,

  • Carl Krauch

  • Fritz ter Meer

  • Georg von Schnitzler

  • Max Ilgner

  • Otto Ambros

  • Friedrich Jaehne

  • Christian Schneider

  • Karl Wurster

  • Carl Lautenschlaeger

  • Ernst Buergin

  • Hermann Schmitz, Heinrich Hoerlein, Wilhelm Mann, Fritz Gajewski, and Hans Kuehne already were members. 62

Of no little significance, in 1937 all Jewish officials of I.G. were removed, including a third of the supervisory board:

  • Carl von Weinberg

  • Arthur von Weinberg

  • Otto von Mendelssohn-Bartholdy

  • Richard Merton

  • Ernst von Simson

  • Alfred Merton

  • Wilhelm Peltzer

  • Gustaf Schlieper. 63

The outspoken Bosch was no longer active head of I.G.; in 1935 Hermann Schmitz had become chairman of the managing board, and Bosch had assumed the relatively inactive honorary post of chairman of the supervisory board. Bosch, however, still retained the respect of a number of key figures in German national life. When Hitler issued a secret directive to the Wehrmacht to prepare for an attack on Czechoslovakia by October 1, 1938, two of Germany’s top commanders, General Walther von Brauchitsch, commander in chief of the armed forces, and General Ludwig von Beck, chief of the army, sought Bosch out as the only German industrial leader who did not fear to speak his mind.


They asked him whether German industry was ready for war. Bosch replied that industry was not ready and that a war was impracticable. Brauchitsch and Beck then asked whether Bosch would be willing to communicate this fact to the highest levels of the Third Reich. Bosch agreed to do so.

Bosch decided that the man to see was Goering, and he talked to Krauch about the best way to get this message to him. Krauch went to Goering’s deputy, Paul Koerner, state secretary in the office of the four-year plan, and relayed Bosch’s request. He was very careful to tell Koerner what was on Bosch’s mind. Two days later Bosch was advised that Goering would not receive him. 64


Despite Goering’s rebuff of Bosch, Krauch himself was on the rise in Goering’s office of the four-year plan. The preceding December Koerner had noticed certain disparities in the four-year plan figures prepared by General Loeb’s office of raw materials and synthetics and had checked with Krauch about the Loeb office estimates on synthetic oil production. Krauch said that Loeb’s figures were far too conservative and could not possibly answer the purposes of the four-year plan. Krauch was ready with an alternative plan that called for a crash program entailing an enormous expansion of I.G. production. Koerner submitted Krauch’s proposal to Goering.


Loeb was furious about Krauch’s criticism and Koerner dropped the matter, but he did tell Krauch to report to him personally if any discrepancies arose in the future. 65


In mid-1938 Krauch renewed his attack on Loeb’s figures. He had come across Loeb’s 1938-1939 projections for the production of synthetic gasoline, Buna, and gunpowder. “I know they are wrong,” 66 he told Koerner. He thought it would be disastrous to use these figures as the basis for making a military decision.

Koerner immediately took Krauch’s warnings to Goering. The next day Goering summoned Krauch, who repeated his criticism of Loeb’s figures in devastating detail. Goering was sufficiently impressed to take the matter up with General Wilhelm Keitel, chief of the High Command. The general assured Goering that Loeb’s figures were correct. Krauch refused to retreat. He pointed out, for example, that Germany’s nitric acid capacity was too low to meet the production levels of explosives and gunpowder called for in Loeb’s plan. 67


Who would know the production figures for nitric acid better than Krauch: despite his official position, he was still head of the I.G. division that produced almost all of Germany’s nitric acid.

A personal confrontation between Krauch and Loeb was inevitable.


It finally took place at Goering’s palatial estate, Karinhall. Koerner later recalled the dramatic discussion between Goering, Krauch, and Loeb:

Krauch presented his views in greatest detail, logically and objectively, and clearly proved that Loeb was wrong. Goering said to me after this meeting that Krauch had made an excellent impression on him and [he] wanted to give him extensive powers for construction of the chemical sector. 68

After this meeting, a more confident Krauch directed his staff to revise Loeb’s program. Krauch’s plan called for greatly accelerated expansion in synthetic oil and rubber and light metals as well as explosives, gunpowder, and poison gas. In mid-July Goering gave his official sanction to this program, which came to be known as “the Krauch plan,” 69 a measure of Krauch’s growing influence and status in the war economy.


Up to this point, Army Ordnance had been in complete control of all explosives production. Under the Krauch plan, all explosives manufactured for the four-year plan would be transferred to Krauch’s control. Since General Becker of Army Ordnance would obviously object to a civilian’s securing such responsibility, Koerner suggested to Krauch that it might be good politics to pay a visit to the general.


As Koerner anticipated, Becker objected strenuously to the delegation of this authority to Krauch. He told Koerner that although he found Krauch himself “objective and cooperative,” he foresaw complete confusion if Army Ordnance and Krauch each had a production plan for explosives. In Becker’s view gunpowder was strictly a military product and control of its production should not be in the hands of civilians. 70


Krauch countered with a secret memorandum to Koerner. 71 The production of explosives, gunpowder, and poison gas was an inextricable part of the chemical industry and therefore the entire chemical sector must be under the control of a single agency with ties to industry. On August 13 Krauch followed up with what he termed the “rapid plan,” which called for even greater increases in productive capacity for these chemical military products. 72


But Army Ordnance continued its opposition to civilian domination over matters that were so clearly military. With the invasion of Czechoslovakia imminent, Goering resolved the dispute. On August 22 he put Krauch in charge of the entire chemical production of the four-year plan with the title of Plenipotentiary General for Special Questions of Chemical Production.

War was avoided in the fall of 1938 by the signing of the Munich agreement. The delay gave Krauch another year to consolidate his power. With war a certainty in 1939, he withdrew at last from his day-to-day duties at I.G. However, he did retain his key position as a member of the I.G. managing board and no matter what his role or duties were in the Nazi hierarchy, he was first and last an I.G. man. By now I.G.’s leadership in the industrial preparation for war was undisputed. Its factories and laboratories were working overtime for the coming onslaught on the world by Hitler.


Making “the four-year plan an I.G. plan” proved its worth for Germany and for I.G. Even a partial list of the products I.G. produced for German rearmament demonstrates clearly that I.G. was indispensable: it produced almost all of the synthetic oil (direct and by license), synthetic rubber, poison gases, magnesium, lubricating oil, explosives, methanol, sera, plasticizers, dyestuffs, nickel, and thousands of other items necessary for the German war machine.

Krauch became the symbol of I.G.’s contribution to Germany’s military strength. At a birthday party in his honor, a grateful Goering approached Schmitz: “I thank you very much that you have given me Krauch.” When war finally came and the Wehrmacht overran Europe, Hitler himself bestowed upon Krauch a decoration reserved for heroes--“Knight of the Iron Cross”—calling him “one who won marvelous victories on the battlefield of German industry.”

Never before in the history of warfare had an industrialist and an industrial concern occupied such a crucial place in the military planning and preparation for a great war. It was a military-industrial partnership at its purest.

Schlieffen was truly dead.


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